Sunday, January 27, 2008

Money Managers Woos Sovereign Wealth Funds

--There is a new courtship ritual among U.S. money managers hungry for business: They are wooing the world's cash-rich foreign governments.
--For money managers, this source of revenue has become important as inflows from defined-benefit pensions and certain mutual-fund markets have flattened industrywide
--Altogether, government funds are home to about $2 trillion to $3 trillion world-wide, and are expected to top $12 trillion in a decade, according to British bank Standard Chartered PLC.
--Merrill Lynch & Co. estimates a potential shift of $1.5 trillion to $3 trillion of assets into the global asset-management industry in coming years, generating $4 billion to $8 billion annually in extra fees.
--While payment structures vary, outside managers have been known to earn as much as 0.4% of such institutional assets in fees.
--Challenges are emerging for the firms scrambling for a share of this business. Many funds are favoring money managers who has local offices in their country.
--Many funds also are doing more of their own screening for external managers rather than relying on outside data or advice from consultants, said Ric van Weelden of Janus Capital International.
--China's fund has been disclosing criteria for choosing external money managers. The fund explains that applicants must have more than six years of investment experience in the asset class for which they apply, and must already have total assets under management of at least $5 billion, with no severe regulatory penalties in the past three years.
--The window for opportunities like these, while open now, also could snap shut in coming years, because many government funds are ramping up their own in-house expertise.